NZ shares up with Evergrande lurking in background

New Zealand shares edged higher as fear of Evergrande’s collapse faded into the background and investors were happy to buy on the recent dip in prices.

Wednesday, September 22nd 2021, 7:36PM

by BusinessDesk

The S&P/NZX 50 Index rose 38 points, or 0.3%, to 13,215.8. Turnover was $145 million.

While headlines proclaimed Chinese property development giant Evergrande could become insolvent and disrupt global markets any day, it has not yet happened.

There were no developments overnight with the market watching closely for a signal that the Chinese government may step in to help restructure the firm’s debt.

Sam Trethewey, a portfolio manager at Milford Asset Management, said there was no sign of any negative spillover yet, but it had acted as a catalyst for investors to acknowledge pre-existing risks.

Global share markets were moderately flat compared to recent drops, while NZ’s benchmark equity index crept higher.

Synlait Milk led the gain, climbing 3.8% to $3.28 as Monday’s earnings report gets closer. Following it upwards was its key buyer A2 Milk Company which rose 2% to $5.64.

Analysts have said they do not expect guidance but are hoping to get an update on how the firm will manage its balance sheet to reduce debt levels.

Retailer Kathmandu Holdings was up 2.7% at $1.50 after Jarden analysts reiterated a ‘buy’ rating and a $1.75 target price in a note today.

They said the stock’s valuation had the potential to climb more than 20%, while also having a 4% dividend yield and a conservative balance sheet.

“We believe Kathmandu presents an attractive risk and reward, driving our buy rating” despite the recent earnings downgrade driven by lockdowns, they said.

Fellow retailer Hallenstein Glasson Holdings also climbed 2.5% to $7.10 during the session.

Logistics companies Mainfreight and Freightways both advanced, climbing 1.7% to $93.92 and 1.3% to $12.82, respectively.

Heartland Group Holdings posted the day’s biggest gain up 2.6% at $2.27.

Restaurant Brands NZ climbed 1.6% to $15.55 after sharing its interim report having already reported earnings to the market last month.

The company said in the report that trading “remains strong across all divisions” but warned covid-related uncertainties, particularly in Australia and NZ made it “difficult to provide firm profit guidance”.

Trustpower shareholders voted to approve the sale of its retail business to Mercury Energy and a move to becoming a generation-only company called Manawa Energy.

The $441 million deal will result in Mercury buying retail electricity, gas and telecommunications services from Trustpower.

Mercury NZ shares fell 1.5% to $6.50, while Trustpower shares gained 0.8% to reach $7.49.

Jason Wong, BNZ rate strategist, said speech notes released by the Reserve Bank of NZ yesterday had resulted in market interest rates “more-or-less fully pricing a 25-basis point hike and no chance of a 50-point move” in the official cash rate next month.

The speech also pushed the kiwi dollar lower, to about 70 US cents. It was briefly pushed higher overnight, to 70.50 cents, only to settle back where it started.

Tags: Market Close